Proposed NC bill could save veterans millions in taxes

RALEIGH, N.C. (WNCN) – North Carolina military veterans could save an estimated $20-30 million dollars in taxes each year if a proposed bill passes through the State House of Representatives.

State senators voted unanimously this week in support of a bill to exempt veterans from paying state income taxes on money received through military pensions. Sen. Ronald Rabin, a retired Army colonel, proposed the change which will also apply to survivorship benefits paid to family members of those who served.

“They spent roughly years defending our rights and our freedoms and the Constitution and all of those things that we hold dear. I don’t see how we cannot make a move like this,” Rabin said.

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“We try to show our appreciation in a lot of ways, and I’m grateful for that as a veteran, but this is really a small way to show we really appreciate what you’re doing.”

Most states do not charge income tax on military retiree pay. North Carolina currently exempts veterans who retired before 1989 with at least five years of service, but the proposal expands that.

Rabin qualifies for the exemption as he retired from the Army in 1980 following 24 years of service. He said the state needs to do right by other veterans, and this can serve as a motivator for them to stay in or move to North Carolina.

“I have a relative that’s retired Army, and he refused to come back to North Carolina because of the taxes,” retired Army sergeant Patricia Harris said.

Harris served for 22 years and was the State Commander of the American Legion of North Carolina from 2013 to 2014. She said many other friends chose to live in states which have exemptions on military retiree pensions.

“I like calling North Carolina home, and I want to be on the same playing field that the other states are giving the breaks to, because we earned it,” Harris said.

Retired Navy Master Chief Petty Officer John Sandrock said the change will likely save him a few hundred dollars a year on taxes. He said the military pension alone isn’t enough to live off or retire, and he works full time for the Lee County Veterans Services office, helping others get benefits to which they are entitled.

Sandrock said the sacrifices made by service members and their families merit consideration.

“You come out into the civilian world and then what you find out is they’re taxing your retirement pay,” Sandrock said.

“I spent 22 years in, most of it away from family. We moved 11 times in 22 years, and I just feel like it’s the right thing to do.”

The change could remove an estimated $22 million from state revenue in 2017-18, a number that could increase to $32 million within five years. However, Rabin said that is a tiny amount of the state budget, and would likely be offset in other areas that would be lost if the veterans weren’t in North Carolina.

“If the veteran or retiree decides to stay in the state, he usually has another job on which he’ll pay taxes. More often than not the spouse might be working, or other members of the family will be paying personal income tax,” Rabin said.

“They will be buying homes and paying property tax. In the net, it would be a wash. I think it will work out to our advantage over time because we’re moving more and more to sales tax anyhow.”

Rabin said the state House may not pass the bill during this session, but he hopes it will be approved during an August or September legislative session.

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